Thank you for standing by. My name is Gill, and I will be your operator for today's call. At this time, I would like to welcome each and every one of you to the Bio-Rad Second Quarter 2025 Results Conference Call and Webcast. [Operator Instructions]. It is now my pleasure to turn today's call over to Bio-Rad's Head of Investor Relations, Mr. Edward Chung. Please go ahead.

Good afternoon, everyone, and thank you for joining us. Today, we will review the second quarter 2025 financial results and provide an update on key business trends for Bio-Rad. With me on the call today are Norman Schwartz, our Chief Executive Officer; Jon Jonathan DiVincenzo, President and Chief Operating Officer; and Roop Lakkaraju, Executive Vice President and Chief Financial Officer. Before we begin our review, I'd like to remind everyone that we will be making forward-looking statements about management's goals, plans and expectations, our future financial performance and other matters. These statements are based on assumptions and expectations of future events that are subject to risks and uncertainties. Our actual results may differ materially from these plans, goals and expectations. You should not place undue reliance on these forward-looking statements, and I encourage you to review our filings with the SEC, where we discuss in detail the risk factors in our business. The company does not intend to update any forward-looking statements made during the call today. Finally, our remarks today will include references to non-GAAP financials, including net income and diluted earnings per share, which are financial measures that are not defined under generally accepted accounting principles. In addition to the -- excluding certain atypical and nonrecurring items, our non-GAAP financial measures exclude changes in the equity value of our stake in Sartorius AG in order to provide investors with a better understanding of Bio-Rad's underlying operational performance. Investors should review the reconciliation of these non-GAAP measures to the comparable GAAP results contained in our earnings release. We have also posted a supplemental earnings presentation in the Investor Relations section of our website for your reference. With that, I'll now turn the call over to our Chief Operating Officer, Jon DiVincenzo.

Thank you, Ed. Good afternoon, everyone, and thank you for joining us today. We are pleased to share our second quarter 2025 results, which reflect solid execution across the business. Both revenue and operating margin exceeded consensus expectations, underscoring the strength of our portfolio and the discipline of our teams in a challenging and rapidly evolving macroeconomic environment. Our Clinical Diagnostics business remained stable, while our Life Science segment benefited from the strength in our process chromatography portfolio. Product mix and a continued focus on cost control and discretionary spending helped drive an outperformance in operating margin for the quarter. While we continue to face headwinds in the academic market due to constrained government funding, we saw signs of stabilization, particularly in consumables. This resilience highlights the enduring demand for our differentiated assays and reagents, including Droplet Digital PCR consumables, which saw high single-digit revenue growth versus 2024. The second quarter was a busy one for our ddPCR team as we completed the development of the QX Continuum platform and successfully closed the acquisition of Stilla Technologies, adding new platforms and a fantastic team of colleagues to Bio-Rad. Synchronized with the closing of the Stilla acquisition, we launched the rebranded QX700 Series ddPCR instruments. The combination of the QX Continuum and QX700 Series products are positioned to expand our Droplet Digital PCR portfolio for customers requiring a simplified workflow and flexibility at various budget levels. Although it is early, customer feedback has been very positive. We look forward to showcasing these innovations at the upcoming ddPCR World Conference in Seoul, Korea this September, along with a series of satellite events across APAC, EMEA and the Americas. Also during the quarter, several of our key ddPCR partners made progress in bringing this technology to the diagnostic market. Incyte Molecular Diagnostics, formerly…

Thank you, Jon, and good afternoon. I'd like to start with a review of the second quarter 2025 results. Overall, we executed well during the quarter. Net sales for the second quarter of 2025 were approximately $652 million, which represents a 2.1% increase on a reported basis versus $638 million in Q2 of 2024. On a currency-neutral basis, this represents a 1% year-over-year increase and was primarily driven by sales of our process chromatography products. Sales of the Life Sciences Group in the second quarter of 2025 were $263 million compared to $251 million in Q2 of 2024, which is an increase of 4.9% on a reported basis and 3.8% on a currency-neutral basis, primarily driven by the increase in process chromatography and food safety product sales. Currency-neutral sales increased in the Americas and EMEA, partially offset by decreased sales in Asia Pacific. Our process chromatography business experienced strong double-digit growth on a year-over-year basis due to orders pulled into the second quarter by customers. The orders represented approximately 20% of the quarter's process chromatography sales. Zooming out of the second quarter results, we now expect low double-digit growth for this product area in 2025 versus our prior high single-digit growth outlook. Excluding process chromatography sales, our core Life Science Group revenue decreased 1.7% year-over-year and 2.7% on a currency-neutral basis, reflecting ongoing softness in the biotech and academic research market, which affects instrument demand. Sales of the Clinical Diagnostics Group in the second quarter of 2025 were approximately $389 million. compared to $388 million in Q2 of 2024, essentially flat on a reported basis and a decrease of 0.7% on a currency-neutral basis. The decrease is because of the previously discussed lower reimbursement rate for diabetes testing in China, partially offset by increased demand for our quality control and…

Thanks, Roop. Again, I think as we all know, the second quarter remained tumultuous, but it does seem we're all getting used to it for what it's worth. I think in any case, it's good to see our customers adapting to the current situation and figuring out how to navigate. And it's nice to see some positive signals relating to NIH funding for 2026. We discussed tariffs. Obviously, it's still evolving. The U.S. government policies are a work in process. But I think to the credit and determination of Bio-Rad employees around the world, as a company, we remain resilient and continue to advance our business on many fronts. Probably good to take a moment here to welcome the Stilla employees to Bio-Rad. I've had the chance to interact with some of them in the last few weeks, and I think they are a great addition to Bio-Rad. As Jon mentioned, Mike Crowley, who's been leading our global commercial operations is retiring after a long and distinguished career at Bio-Rad. Mike has been an important part of Bio-Rad's success over the years. Just a call out, thank you, Mike, for all your contributions. So I think that concludes our prepared remarks. Gill, I think we'll now open it up to take questions.

[Operator Instructions] So your first question comes from the line of Patrick Donnelly with Citi.

Maybe first, just on the process chrome side, nice to see those results this quarter. I think you hinted at maybe a little bit of pull forward. Can you just talk about, I guess, what you saw in the quarter, what sense you have for how much of that was pulled forward? What's sustainable? Just want to talk through, given what's going on with tariffs and everything, it felt like maybe there was a little bit of an impact there. So it would be helpful if you could just talk through that and the expectations for the remainder of the year on that piece.

Yes, of course. So first of all, I'll start out with maybe for the full year, we actually raised kind of the previous guide on process chrome from high single digits to low double digits. So I think that maybe answers your question on sustainability. We think it is sustainable. Yes, we've had both in Q1 and Q2, a little bit of movement between quarters because these are customer conversations where they want to pull it forward for their own purposes. I can't necessarily say it's because of tariff related. That's not necessarily the driver, but just in terms of their production time frames and these sort of things. So we were more than happy to help support it. And as I said earlier, I think we see that as continuing to sustain through the rest of the year and expect it to be still good for us.

Okay. Understood. And then in the guidance, I just want to clean up. I know Stilla is now in the guidance. Can you just peel back what contribution that is? Did the organic number move? I just want to make sure I understand where the raise came from, what's organic, what's Stilla? If you could just help us out there, that would be appreciated.

Yes. So we got a few different ways. So Stilla is now in the guide as we had indicated we would once we closed the transaction, which we did as of June 30. So that's in there. So when we take the guide up, included in there is the ddPCR growth rate moving up to that mid-single digits that we talked about. That movement is solely Stilla specific because Continuum, we already had in our original guide coming into the year because we expected it to be released in 2025, although we didn't specifically give dates, as you know. So that piece is in there, and that contributes to that ddPCR growth rate increase, which obviously then takes our range up overall to that 0% to 1% versus the previous wider range that we had, including the -- down to the minus 3%. And so maybe just to summarize, right? So there's process chrome, which we just talked about in terms of increased growth opportunity, the ddPCR, including Stilla, and then the third piece is consumables, which have continued to be more durable, which we commented on during the script.

Yes. That's helpful. And then maybe last one, just on the margins. Obviously, a lot of moving pieces there with some of the tariff moves. Can you just talk about, again, the delta, the bridge from the old guide to the new? What are the moving pieces? What's tariffs, what's not, would be helpful.

Yes, of course. So the biggest piece, tariffs have come down significantly. So that's a big piece, right? If you remember in the prior calls, we had indicated we could see up to 130 points of headwind on tariffs at the bottom line. We now think that that's 30 to 40 bps of headwind on the op margin related to tariffs. So significant change there. So if you think about the op margin change from 10% to 12% previously to now the 12% to 13%, you can see about 100 bps of that is related to tariffs. The rest of it is related to, one, expecting to see because of Stilla and other things, some better absorption from the manufacturing standpoint. And then, of course, the mix continuing to be stable for us and positive, if you will, because of the consumable pull-through. So those are the different pieces there.

Your next question comes from the line of Dan Leonard with UBS.

My first question is on the diagnostics market in China. I could use a bit of help understanding how all the headlines relate or don't relate to Bio-Rad over there and why?

Yes. Maybe I can start, Jon, and then Norman jump in. So the -- I guess there's 3 pieces if you think about right now. I mean, China still overall is soft. So I'll start with that. So maybe that's the 4 pieces. So that's number one. China is continuing to be soft. With that said, I think in terms of some of the elements that Jon mentioned, I think, in his part of the script, VBP, we've not seen any impact of VBP, and we continue to not see impact from VBP. So that's not something we've seen. You mentioned DRG. That's something we actually saw earlier in the year. And Dan, if you remember, we actually indicated that we took our numbers down after the -- during the Q1 call for the rest of the year because of some softness in Diagnostics. Part of that was some of this China DRG piece that was in there. So we'd already contemplated that. And we haven't seen any significant change or change from what we've commented on back then. The final piece is around the reimbursement rate changes. I mean it's something our teams continue to monitor, as Jon said. But we haven't seen any news that we've got further reimbursement rate changes that could negatively impact us.

Yes, exactly, Roop, and And I think -- Dan, this is Jon DiVincenzo. Essentially, it reflects our mix versus maybe some other suppliers. We are a specialty diagnostic supplier. A large part of our portfolio are quality controls, which are not necessarily affected by reimbursement. And then the other areas that we called out, yes, we were affected by the diabetes reimbursement, but other areas -- specialty areas are not really targeted at this time by those policies. So I just think it's where they've looked at the bigger spend, the larger maybe areas there, and it has not affected us, and we don't think that it's part of their view moving forward.

And Jon, on the panel testing, pressures over there, I know you supply panel test through the BioPlex 2200, but from a mix perspective, is that just not a big part of your mix in China?

Right, exactly. I think that's the explanation, yes.

And then for my follow-up question on the tariff environment. I appreciate that there is lesser operating margin headwind due to the rollbacks. I'm wondering if -- I'm wondering more -- how are you managing your business given all the uncertainty? Are there actual countermeasures you've put in place for a more severe tariff environment that you've had to roll back? Or are there things that are in flight, which remain in flight? If you could just talk through that process a little bit for me, that would help.

Yes. So we have taken a number of actions. Obviously, we've taken a fine, fine look at all of our different suppliers across various geographies. We have already started to move some of the way we move materials around the world where we make product. We have plans in place to even be more flexible in the future and adapt to what's the best source of those products. So we've worked with suppliers. We've worked with our own teams. We built -- replicated in some areas, some manufacturing capabilities if it becomes necessary. We didn't want to overdo it because of all the volatility still out there. But as things settle down now, we think we're in pretty good shape where we know where the challenges are. We have some flexibility from our suppliers, and we have flexibility in our own plants to move manufacturing around. So we feel like as much as we could be, we have some adaptability there and some resilience.

Your next question comes from the line of Brandon Couillard with Wells Fargo.

Roop, as we look at the second half, how should we think about revenue margin phasing between third and fourth quarter? And did the second half organic guide actually come down if we exclude the Stilla contribution?

No, it did not organically. I mean we've got some headwind in the Diagnostics side, but Life Sciences continue to inclusive of Stilla is helping support kind of that overall increase, if you will. In terms of the profiling, I think Q3 is going to look similar to Q2 from a top line perspective. And then, of course, we've got the fourth quarter with seasonal increase that we expect to see overall. So we may see a little bit of strength in Q3 over Q2, but not much. But then we've got Q4 stepping up kind of reasonably, although probably not as much as what we saw before. I think some of that's moved around a little bit into whether it's Q3 into Q2, et cetera, from an overall profiling standpoint. From a margin standpoint, what you're going to end up seeing is Q3 margins being somewhere in the similar range of Q2. And then in Q4, because we do have -- part of it is the mix with higher quality systems and some of the ddPCR flow through Q4 margins and then the improved absorption to be better than Q3 and Q2 from an overall standpoint to land within kind of that midpoint of the range of what we provided the 53.5% to 54.5%. And we spent quite a bit of time with our commercial teams and customers to look at that ramp that we have in the fourth quarter. Fourth quarter is a significant increase over the previous few quarters there. But it's a little bit of timing, and it's kind of year-over- year, we see a number of areas of our business have larger orders. And we have both high confidence in the orders coming through as well as all of our supply teams to be able to deliver that product during the quarter. So pretty good confidence level in the fourth quarter number as well even...

Okay. That's helpful. And then on ddPCR, did you comment on how instruments performed in the quarter? And then secondly, it's nice to see Continuum finally coming to market. I think you mentioned that it was already baked into the guidance. But do you think there's any pent-up demand in the market for that system? And how are you kind of positioning it relative to the Stilla platforms?

Yes. So I recognize the team did a great job not only kind of getting to the finish line and closing the acquisition, but keeping that focus on Continuum and having very, very robust quality data to be able to launch that into the marketplace. There's a lot of excitement about it. I mean the Continuum platform was designed to replace qPCR. It's a 96-well plate standard format, and there's a lot of excitement about that bringing more precision sensitivity to those applications. So a lot of excitement there. So we're kind of on track to what we had kind of forecasted going into the year. On the QX700 series, the team has already rebranded them, positioned them. We're moving -- we have hundreds of thousands of assays that have been developed over the last decade or so. We're moving those on to Continuum and to the QX700. So we -- a week after we closed the deal, we had our sales team in Pleasanton, California being trained on them, and we continue that training globally, both in sales and service. So we're doing everything possible to drive share and expand overall the market for digital PCR. So a lot of excitement for both those products coming to the market on our assay content.

Any color on just how instruments -- ddPCR instruments performed in 2Q?

Yes. They were -- I mean, on a sequential basis, they were slightly better. But on a year-over-year basis, it was relatively weak overall.

Still very soft, particularly in the academic market where people are not sure of their budgets overall. So we see softness across the board instruments, not just digital PCR, but all other instruments as well. And just a little bit of color to that. We have not factored in any kind of end of year budget flush, but potentially, that's some upside for us as we speak to customers on a daily basis here. And potentially, there'll be a little more confidence in their budget and there could be a little bit of upside, but we have not factored into our forecast.

Your next question comes from the line of Jack Meehan with Nephron Research.

First question, I wanted to ask about the process chrome strength in the quarter. How much of this is just small numbers and easy comps versus can you talk about what you're seeing in terms of order patterns with your customers and any recovery there?

Yes. So I think we're getting back to a normal state where it's not a matter of customers being overstocked anymore. There might be some of that in some places, but I think it's more of an appropriate relationship between how they need product, when they need product and when they're ordering from us. So you're right, it's an easier comp. Last year was a soft year as we allowed our customers to adjust to kind of their inventory levels they wanted. And now we think it's more of a direct correlation between their demand and what they're ordering from us, and it's more similar to the volume that we saw in years past before kind of the volatility of supply chain challenges and overall their own managing their inventory.

Okay. And then sticking with Life Sciences, you called out food safety as a growth driver. It's been a while since we talked about that product family. Anything to note there?

Our food safety business is an interesting one because we're essentially taking our products that are used in life science research and now they're developing specific content for the food applications. And that area had continued to grow high single digit. We have a very strong team focused on that. It's not a huge business for us, but it is an interesting kind of additional market -- applied market that do not have some of the challenges that we see today in life sciences or in biotech. So it's an area that we're looking to see what more could we do there in the next few years.

Okay. And last one, I wanted to circle back on the U.S. federally funded research customers. Just as you look at them as a customer class, can you talk about how the demand played out throughout the quarter on consumables and instruments? Was it stable? Did it strengthen or weaken at all? How are you feeling about that?

Yes, Jack. It was stable throughout the quarter and improved from where it was in Q1, where I think there was a bit more paralysis, if you will. And that's part of what we're anticipating for the rest of the year to see that continuity from Q2 through the rest of the year.

Your next question comes from the line of Tycho Peterson with Jefferies.

This is Matt on for Tycho. Roop, to go back to process chrome, just -- and I appreciate the disclosures in the deck you guys gave this quarter, but it seems to suggest that on a dollar basis, process chrome was up like $15 million, $16 million year-over-year. Are you saying 20% of that is tied to pull forward, so maybe a few million was pull forward? And then any more color you can provide on just the strong double-digit growth, just given the revenue base of that business and those disclosures, I mean, that would suggest that the strong double digits was something like 50% plus in the quarter. So any more clarity you can just add in terms of the magnitude of the process chrome growth and the comp you had in 2Q here?

You like to...

Matt, you got a lot of -- I appreciate all the numbers there. Listen, I think you're a little high on some of those numbers. So when we think about process chrome and where it landed for the quarter. Obviously, we've got an easy comp from a '24 standpoint. And as we've talked about, we've got, I think, as John said, a more normalized environment. So that's been a good. On a sequential basis, we saw strength on process chrome as a result and obviously, a very strong compare on a year-over-year basis. It's not quite 50% on a year-over-year. It's kind of maybe closer to half of that or slightly above half of that sort of number, how you ought to think about it.

Okay. That's helpful. And then just to go back to the new digital PCR launches. It sounds like you have the whole team out there right after it closed. Can you just talk about what you're doing on the commercial side to stimulate demand? Are you running any promotions for existing ddPCR customers? I understand it's a different part of the market. Or are you running any kind of targeted programs for high-end qPCR customers? Just talk about how you're kind of positioning the 700 series in the Continuum going forward.

Yes. And we will share more details at a webinar coming up here. But it's exactly, the point is that this is not to replace our installed base. It's really to expand the number of users for digital PCR. It is a very simple workflow at right kind of price points to take share from qPCR. And also, as you said, in the high end, with the QX700 HT and our existing QX600 products, we continue to have the high sensitivity products in the market. And we see a number of applications where rather than next-gen sequencing, they can apply digital PCR for kind of faster and less expensive solutions for them. So it's expansion of the marketplace primarily. Of course, there are some areas where it will hit kind of the center of the existing ddPCR market. But in general, it's to expand the number of users of Droplet Digital PCR.

And maybe if I could just sneak one more in. OUS academic government, would just be curious kind of what demand trends look like both in Asia and Europe in 2Q and kind of how you're thinking about the funding and demand backdrop ex U.S. for A&G for the rest of the year?

Yes. So maybe Roop will give more details on it. But when we say academic, we're specifically talking about global academic, where some countries in Europe have shifted budgets to defense or other areas. It's a zero-sum game in some areas. So they're slowing down some investments in academic. So it's not just a U.S. phenomenon. It's a global phenomenon. I can't say I know exactly in China if it's really seen that way or not, but certainly, U.S. and Europe are similar in pressures on academic funding.

I think you're spot on, Jon. And just from an APAC standpoint, China is continuing to be soft. We're seeing some movement -- positive movement in Korea and Japan, which is great to see because they've been kind of jammed up for a bit of time now. But China is kind of in that softness category, if you will. In both...

Thank you everyone and -- okay, sorry.

From an academic standpoint, just to reiterate what we said [indiscernible], our customers are focused on keeping their people and keeping the research going. So I actually commend them for their ingenuity in making that happen. But it shows in our results for our assays and reagents that are continuing to be used. We can see the research is continuing. Even in uncertainty, they're moving science forward. And I think it's commendable that with all the disruptions and unknowns that they continue to do that, and we see that in our numbers.

So your next question comes from the line of Conor McNamara with RBC.

This is David Carter for Connor. I just wanted to call to ask about, can you confirm if the organic number for Q3, which goes from like a negative 3% that goes to about positive 5% in the fourth quarter?

That sounds about right because you're looking at it from a total company standpoint. Is that right?

Yes, that's correct.

Yes. So that's right in terms of how that progresses through the year.

And again, part of that is in the fourth quarter last year is when we first saw the reimbursement changes in China. So that's annualized at that point in time. So that's kind of not necessarily because all of a sudden, there's a better market dynamic, it's more of a comp to it.

And just to follow up on the Continuum. How has the response been for the lower throughput customers because I know that was one aspect of the portfolio, there was a gap for that for the ddPCR. How is the uptake from that portion of customers?

Yes. I think it's too early to give you actual results, but actually the flexibility on the Continuum where you can have 1 sample or 96 samples is cost effective and it also meets those customers more episodic when they're actually using the platform. So that's one of the advantages that we're touting to the product. But probably a little too early to tell that there's direct customer user feedback yet. Give us a month or so.

Okay. Still early rounds, no problem.

Thank you, everyone. And that concludes our Q&A session for today. I will now turn the call back over to Mr. Edward Chung for the closing remarks. Please go ahead.

Thank you for joining today's call. As previously discussed, we are planning to host a webinar on Droplet Digital PCR and our updated portfolio on August 26 at 1:00 p.m. Eastern Time, 10 a.m. Pacific. We will post registration information on the Investor Relations section of bio-rad.com shortly. As for upcoming investor conferences this fall, we'll be participating at the Wells Fargo Healthcare Conference in Boston, and the Morgan Stanley Global Healthcare Conference in New York. Our CEO, Norman Schwartz will also be participating on an industry panel at the Nephron Healthcare Summit in Napa. As always, we appreciate your interest, and we look forward to connecting soon.

Ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect. Have a nice day ahead, everyone.